Fuel Subsidy: After Seven Years, Buhari Transfers Burden To Successor

After seven years of battling and failing to deliver promises on fuel subsidy, the Muhmmadu Buhari-led administration has resolved to transfer the burden to the next government.
After weeks of apprehension over the fate of fuel subsidy, the Federal Executive Council announced the extension of the fuel subsidy regime for 18 months, in essence, the current regime would have elapsed by then, leaving the successor to inherit the burden.

Within the next 18 months, the administration will spend N3trillion on PMS subsidy. The decision to extend the subsidy period followed pressure from labour groups, civil societies and a cross-section of Nigerians.

Despite the Petroleum Industry Act and the reform of NNPC as a limited liability company, the government will continue the subsidy regime.

In this analysis, DAILY POST reviews the measures taken by the government to address subsidy and impact of those measures on Nigeria and Nigerians.

Buhari as Petroleum Minister

Buhari, a former Minister of Petroleum announced himself as substantive Minister of Petroleum in 2015 amid high expectations.

Before his emergence as President, Buhari had claimed that anyone who says he is paying oil subsidies is a fraud.

During electioneering campaign trail in 2014, Buhari continued to deny the existence of subsidy, thereby constantly accusing the then government under the leadership of Goodluck Jonathan of deceiving Nigerians.

“Nigerians are being deceived on the issue of fuel subsidy. The federal government takes out fuel for refining, only to come back and talk about removing the subsidy. That is nonsense and an attempt by a clique with the PDP-led federal government to siphon the proceeds to be realised from the removal of oil subsidy,” he had said.

But as a president, Buhari has failed to address fuel subsidies and his government continues to pay what he had described as “fraud” and “deception”.

Under recovery by NNPC
Since the beginning of this administration, the NNPC became the sole importer of Petroleum Motor Spirit (PMS) and has been making deductions from its revenue. This action has led to NNPC claiming it has no profit to remit to the federation.

Mele Kyari, the Group managing director of NNPC, last year, said the corporation was paying N100billion monthly to keep the price of PMS at the current level.

On May 11, 2016, petrol pump prices were hiked from N87/litre to N145/litre. Following this increment, the government claimed it had “removed subsidy for good.” Vice President Yemi Osibanjo then announced the end of subsidy.

The then Minister of Petroleum (State) Ibe Kachikwu, even claimed that prices of PMS will collapse six months after the 2016 “removal of subsidy.”

However, it later emerged that NNPC was paying subsidy but not from budgetary allocation, but through under-recovery.

The crash in oil prices globally due to COVID-19 pandemic led to reduction in the pump price of PMS, from N145 per litre to N125 per litre. Following the rebound in the prices of oil, the pump price jumped to N162 per litre.

In March 2021, the defunct PPPRA had announced the planned increment of petrol to N212 per litre, following outcry, the government made a U-turn and disowned PPPRA’s announcement.

Despite this, Kyari continued to express the inevitable hike in price of fuel.

Last month, an ad hoc committee constituted by the National Economic Council, chaired by Governor Nasir Elrufai of Kaduna State, had recommended N302 per litre as price of PMS.